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Wednesday, April 27, 2005

Remember the criticism leveled at all of the 9/11 souvenir sellers around Ground Zero?

Here is the latest hot item from J-Crew.

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Embroidered djellabah Our lightweight linen tunic, inspired by the original tunics from Morocco...

No longer does a teenage girl have to get a tattoo, a nose ring, or date an older freak to piss off her parents. Now she can dress like a terrorist. You have to love teenage rebellion.

While my wife is irate at J-Crew for this, I have a divergent point of view. I feel J-Crew is providing a service - that of separating fools from their money. Or at least taking it from their parents. $98, plus shipping and handling. Here is the link.

Monday, April 25, 2005

I have been planning to address SUVs for a while and as expected, with gas prices rising they have become quite the hot button issue. I just googled “high gas prices suvs” and got an ABC News story from today that almost hit the nail on the head – in terms of what I was looking for. ABCNEWS.com polled its readers “How they felt about the idea the SUVs and pickup trucks might be hit harder by rising gas prices.” Of course they got an enormous response and published 4 pages of feedback. This article was unmitigated vitriol and could make almost anyone’s blood boil (on either side of the issue).

I always thought that the anti-SUV sentiment was two-fold, "global warming" and about bidding up the price of gas/oil. But I have learned that the loathing runs much deeper. SUV antipathy is more of a bricolage complaint and a weapon of class warfare. Here are some excerpts:

"I have hated SUVs and the mentality that gave birth to them since the early '90s when I was in high school, and will continue to hate them and the people that drive them with a righteous anger for as long as I draw breath," wrote Andy Bliss of Los Angeles. "On a daily basis, I let these people know my feelings with my car or a few fingers/choice words. I despise their selfishness, avarice and soul-less need to endanger others for their own comfort. I laugh as I fill my economy car for a fraction of what they do, watching them wallow like the pigs they are in their putrid opulent consumerism."

"I am less than secretly glad when I hear the agony of the SUV people paying $60 to $70 a week to fill their tank," wrote Bernard K. Addison of Los Angeles. "We do not need the size, we do not need the inefficiency, and we do not need the attitude of road ownership and invincibility that reflects in the driving patterns of the majority of SUV owners."

"It's good to see all these arrogant drivers of gas guzzling road machines end up paying half a week's pay to fill up their monstrous machines," wrote Brian Silver Fox of Hammonton, N.J. "I am far from an environmental activist, but there is no reason why anyone needs these vehicles, ESPECIALLY Hummers (which, like assault weapons, should be reserved for the military). I truly enjoy seeing all of them driving around with their jingoistic little magnets on the back, supporting our troops, who are dying simply for their 'right' to own these stupid machines."

"The SUV I hate the most is the Hummer H2," wrote Scott Cohen of Melvindale, Mich. "Every chance I get, I will flip them off, regardless of whether the driver sees me or not. Hummers are the most obnoxious and rude vehicles for people to use to show off how much money they are making, and that they stick their noses up at the rest of us while driving their $65,000 SUV that is a gas hog and is no good for the environment. I do smile when I see them pulling up at a gas station and spending over $60 on one tank of gas, though."

"What many SUV drivers may fail to realize is that the reason for high gas prices now is the massive demand for gasoline, spurred in part by people like them," wrote Daniel Smith-Weiss of Bedford, N.H. "SUV drivers have in part brought these high prices on all of us. So I do get a small sense of satisfaction seeing them pay so much more."

"What I don't like about SUV drivers is their reckless and negligent way they drive," wrote Judith A. Gill of Baltimore, "as if to say 'I do whatever I want on the highway because you can't hurt me but I can demolish you, so get out of my way.' They don't care about gas prices. They think they are superior to everyone else on the highways and roads of this country."

"I don't feel sorry for drivers of SUVs paying huge sums to fill up their gas guzzlers," wrote Peter Bowler of Dallas. "They are half the reason the gas prices are so high and our air is so polluted. I hope the high prices will keep these enormous pieces of crap off the roads."

"Although I don't like the high gas prices that I have to pay for my cars, I don't mind a bit that the SUVs, full-size vans and pickup trucks get hurt by the high prices," wrote Ed Caldwell of Bloomington, Ind. "Some of the drivers of those vehicles drive as though they are above the law. The police are afraid to stop them because they can't see their hands or glove compartment."

"The reason that people with SUVs are not suffering more from high gas prices has got to be because they are wealthy to begin with," wrote Scott Hartman of Toledo, Ohio, who said he drives a small pickup truck and feels the pinch. "You have to be rich to be able to pay $40,000 [to] $50,000 or more for an SUV. They have money to pay for the gas."

"I would like to see gasoline prices rise to $4.50 a gallon or higher," wrote Richard Lane of Prescott, Ariz. "I would like to see a stiff tax levied to bring up the price to what people in Europe pay. This is the only way that Americans will change their gluttonous habits."

"It's amazing all the cars that I see with one person driving in a SUV on the freeway in Houston," wrote Debbie Mejstedt of Friendswood Texas. "I hope the price goes up to the same that it is in Europe. Maybe then people will think twice about their selfish gas guzzling tanks."

Like I said, unmitigated vitriol. As these comments demonstrate, the anti-SUV sentiment transcends energy prices and "global warming".

A couple of quick rebuttals. My evil and irresponsible 2000 Ford Explorer cost $11,000. We bought it because we didn't want to shell out $18,000 for a fuel efficient Toyota Camry with 60,000 miles on it. I also don't remember seeing low prices on any BMWs, Porches, or Audis. So the SUV is not the vehicle of the rich.

I love these people that want gas prices to rise to European levels. Maybe they want the higher European tax and unemployment rates as well. I'll bet the Europeans want our gas prices.

"The SUV I hate the most is the Hummer H2," wrote Scott Cohen of Melvindale..." Does this guy really sit at home and rank his hate of different SUVs? Scott, you are at a minimum, a total loser.

This business about SUV owners being bad or dangerous drivers reeks of delusional paranoia. In fact, I think that driving ability is the one trait that is constant across all demographics. Pick any group or class of people and I can find someone who will say that they are the worst drivers. Young, old, male, female, black, white, Asian, Hispanic, and I am sure liberal, conservative, republican, democrat,... No way SUVs are THE choice of bad drivers. By extension then, you would have to say that all rich people, since they own the SUVs, are the worst drivers. This is nonsense. I never noticed any extra recklessness in SUV driving long before I became an owner - and road safety is a particular peeve of mine.

Now back to gas prices. A favorite tactic of the econo-illiterate is to pit consumers against each other. First they pick who the evil one is, then they create the fallacious argument blaming him for the perceived ills of the righteous consumers. Medical costs are increasing, so blame the obese. When consumers run up credit card debt, blame the "predatory" lenders.

(Just last week, when a Red Sox fan reached over the wall and touched Gary Sheffield and another fan "spilled" his beer on him, the Boston Globe ran a cover story blaming larger beers and more beer stands at Fenway. Never pass up a chance to blame evil business. click for story)

So with gas prices rising, the econo-moronic invariably start the blame game. To them it is this simple, SUVs get fewer miles per gallon, hence their owners are irresponsibly bidding up the price of gas to these high levels. The anti-SUV crowd is unanimous on this point.

Here is how that fallacy breaks down. Last year a relative of mine expressed his displeasure with me owning an SUV. I asked him how many miles a year he drove – 25,000 he replied. I told him that I drive 10,000 a year and there are usually three people in my car to his one. So who is really the gasoline glutton here?

The econo-illits choose the metric that suits their argument. If miles per gallon is the metric, then they can condemn all SUV owners. How convenient. Figuring out total miles driven or total passengers would muddle their argument and is by necessity ignored. So you SUV haters, before you flip off the next Hummer, consider that behind those tinted windows, even a below-average sized “posse” would make that Hummer more fuel efficient on a per person basis. (Consider also that flipping off Hummer drivers could also get you shot.)

This class envy tactic never works. As much as some academics or economists would like to do it, one cannot quantify what specific consumers contribute to the price of a good. This exercise is just way too multivariate and lends itself to manufactured conclusions.

My 25,000 mile per year relative lives 40 miles away from his job. Imagine the stress on highway budgets if everyone did that. So maybe fuel efficiency is to blame here. If he was getting 12 miles per gallon, maybe he would be forced to live closer to his office. Maybe they should legislate that one cannot live more than 15 miles from their office. Or they could just legislate that cars can’t get more than 15 miles per gallon. That would do the trick. I am sure he would be amenable to all of this.

More class envy spin. What about all of these northerners spending each winter in old drafty homes? Aren’t they needlessly living up there when there is plenty of space in the temperate south? They are bidding up energy prices for the rest of the country and contributing to “global warming” more than the southerners. There seems to be a need for some forced migration here. Or maybe they should limit northern homes to 2500 square feet.

See how ridiculous this gets?

How is it that the SUV haters can bash the inefficiency of American cars and drive Hondas and Toyotas, but when elections come, they vote for anti-outsourcing and pro-union politicians? It is tough to keep up with these people.

About “global warming”, all I will say is that the theory won’t gain any traction until meteorologists can at least accurately forecast tomorrow’s temperature – never mind temperatures 10, 20, or 50 years out.

This topic is sure to be revisited. click here for ABCNEWS.com article.

Saturday, April 16, 2005

Marketing, the enormous and pervasive business of selling differentiated products. In our ultra-competetive economy, the ads can become more important than the quality of the products. But all too often, the marketing gets ridiculous. Consumers would be wise to ignore all of the packaging. This is a fun trick I use.

I mentally rename products and brands - but with the appropriate antonyms. If Weight Watchers became "Gut Ignorers", who would buy their products?

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Go Lean becomes "Stay Fat".

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The Baby Einstein brand becomes "Baby Moron" or "Baby Idiot".

Now for the worst offender:

"Rosie the organic range chicken enjoyed the good life before ending up beheaded, plucked, swathed in plastic and artfully arranged on a bed of ice at the Whole Foods Market in Glendale, Calif. Rosie spent life in a custom ranch house in California's wine country and exercised in an airy, sunlit building on an earthen floor covered with clean hulls of rice. She nibbled on golden corn and flew the coop in an outdoor yard. And unlike poultry sold at most grocery stores, this bird never used antibiotics or growth hormones.

That, at least, is the reassuring tale told in the brochure (printed on recycled paper, of course) available for discerning shoppers at the track-lit, pristine poultry cooler in Whole Foods stores. The real point: Rosie is priced at a princely $3.29 a pound, more than twice the cost of your regular bird."

click here and scroll to the bottom to see a side-by-side comparison of prices between Whole Foods and a local grocery store. I like how they call Whole Foods, "Whole Paycheck". What nut would pay $3.89 for a dozen eggs? How much extra does a cage-free egg white omelet cost?

Personally, I prefer the eggs from the tortured, death-row hens in solitary confinement.

As I have noted in a previous post, gas is not at a record high when adjusted for inflation. But that doesn't stop the MSM (mainstream media) from their incessant bleat of "record high gas prices". If gas is at a record high, then so is almost everything else, including newspapers, movie tickets, college tuitions, cable television, etc.

Nobody likes to see the gas pump hit a number $5-$10 higher than normal when filling up their car. But just for fun, let's do the math on how devastating economically gas prices are for the consumer.

I don't drive much, only 10,000 miles a year. Now divide that by the 14 miles/gallon that my Ford Explorer gets and you arrive at 714 gallons of gas per year. So if gas went up $1/gallon, say from 2$ - $3/gallon, I would be shelling out $714 more per year. That is only $60 a month. And this also implies that if gas were to go up to $4/gallon, my monthly budget would be roughly $120 higher.

I can easily shave $60-$120 a month off of my budget, and I think most people can too. I know many people drive more than 10,000 miles a year and may have 2 cars in the family. Nonetheless, I would encourage them to do the math and see exactly how "devastating" gas prices really are.

Since the Sopranos are on indefinite leave, all I have to do is cancel HBO and my land-line phone to pay for the gas increase.

But if you have a 20 mile daily commute and drive one of these:

at 9 miles per gallon.....you are in trouble. I guess higher gas prices are rough on rappers and pro-athletes.

It really is amazing how many people feel that cheap gasoline is an entitlement. All of the small-minded econo-illiterate are scrambling to find out who is to blame for rising gas. They want home prices, stock prices, and the bond market to go up, but nothing else. It just doesn't work that way.

Being the outside-the-box thinker that I am, let me state that I actually am glad that gas is high. It really is very cheap to drive. Roads are crowded, no one car pools, public transit is under-utilized, etc. Mostly though, I think the major problem is that the development and maintenance of public roads is a governmental and taxing disaster. They haven't built new highways or bridges anywhere in years. I think that unless the cost of driving rises, in ten years this country will be one big traffic jam. If I were in charge..... I would make every major road a toll road and require each car to have an EZ-Pass or Fast Lane. This is the only way that you could get the actual users of a road to efficiently pay for it. The system we have now is somewhat socialist.

Monday, April 11, 2005

Now might be the worst time ever to be a first-time homebuyer in the US. To me, the buy or rent dilemma isn't a dilemma at all. If possible, one absolutely must rent instead of buying a first home. Now if somebody has tons of cash, four kids, or lives in an area devoid of rental property - they may justifiably ante up for a house. But most people are not in that situation.

A couple of quick points. House prices are substantially higher than their derivative rental prices. This means that a mortgage on a two bedroom apartment is a lot higher than its market rental cost.

Here is the quick and dirty analysis that I use. Consider that every $100,000 of house costs about $600 a month in mortgage payments. So the two bedroom units in Brooklyn Heights that were listing for $550,000 cost about $3300 a month in mortgage payments. Yet these units can be rented for around $2000 a month. This renting discount is not unique to New York, it is a nationwide phenomena.

I must have heard a hundred times in the last few years, "Well I don't want to piss away money on rent..." So instead these people opt to piss away money on interest. If you mortgage $300,000 at 6%, you will end up pissing away $1500 or so a month in interest. And don't forget real estate taxes, maintenance, PMI, insurance, and the costs of possibly moving later on. Suzy Orman debunks the "tax break" myth and makes a few other relevant points in the link below.

I know that if you go the adjustable route, you can mortgage $100,000 worth of house for $390 a month. Absolutely do not do this, unless you have cash on hand with which you could pay off almost your entire mortgage amount should rates spike. Rates are just off of 46 year lows - lock in a fixed rate and if they go lower, you can always refinance. For you ARM gamblers, don't forget that rates went above 15% in the early 1980s. Most people couldn't handle a move to 9%.

Suffice to say, I am bearish on the real estate market. Here are my reasons:

There are too many people buying today with adjustable-rate products and interest-only loans. Incomes are lower, particularly among young people, than they were 5-6 years ago. The Federal Reserve seems determined to prick the housing bubble. Inflation is taking root and has historically been anathema to interest rates. Half of new construction in Florida is estimated to be "investment" properties. Last year in California, half of new mortgages were "interest only". For more on the stupidity in the land of fruits and nuts, click on this link, it is unbelievable.

Anecdotally, I have come to the same conclusion. I know several people who have bought homes the last few years that have appreciated immensely - at least on paper. Almost without fail, each one of them has either taken out a home equity loan, built an addition, remodeled the kitchen, bought another piece of property, or moved into a bigger home with an increased mortgage. Rare is the story of a homeowner selling his house and downsizing to a smaller home, cheaper region, or RENTING. Here is the bull market analogy - did anyone actually dump their AOL/Time Warner stock when it was over $100 (currently $18 per share)?

In summary, I believe that incipient inflation along with coincident rising rates, will couple with super-leveraged buyers to create the perfect storm for real estate. I am predicting some serious economic pain within 2-3 years. Remember, a pendulum swings both ways.

Sunday, April 10, 2005

I had read, enjoyed, and learned a great deal from Jim's first two books and thus wasn't going to pass over his latest. With oil, gasoline, copper, gold,..... all exploding over the last few years, it would seem to the unknowing that this book is simply a potboiler. But Jim has been tooting the commodity bullhorn for years, although I bet Jim could definitely have written this book in a week. He made gobs of money investing in commodities, racking up 4000% for his fund in the 1970s and allowing him to retire at the age of 37. So he knows what he is talking about and that would be obvious to anyone who reads his work.

In the late 1990s, commodities were trading at Depression levels (adjusted for inflation). I read that Jim was starting a commodities fund and I seriously considered dumping some money in it. Of course, I never did and since its inception, his fund is up 170%.

So now, here we are 7 years later and instead of sitting on some nice capital gains, I am forced to consider buying now at much higher prices. Historically commodity bull markets last 17-18 years, so Jim is quite confident of another decade of great returns.

Now that is an incredibly scary prognostication. If commodities rise for the next ten years, there will be almost infinite pain in the stock and bond markets (and by extension the real estate market as well). While Jim isn't trying to convince anyone to swap all of their current investments for soy beans, lead, and coffee, he at least makes the argument for some diversification into the commodities sector as a portfolio hedge. Historically, commodities have a purely negative correlation to equities.

Much of the commodity story today is about China. Their rapidly growing economy has a seemingly insatiable demand for oil, copper, steel, etc. Count me among the many people that feel China is financial bubble ripe to burst. When it does, I will probably buy some commodities - no sooner. Though not explicit, it seems that the commodities Jim likes best are oil, lead, sugar, and coffee.

This book took me only one day to read and at a cover price of $25.95, I am glad I borrowed it from the library. I figure this a good way to recoup some of my tax dollars. I used to buy books new, read them, and then clutter my apartment with them indefinitely. Then I got wise and starting buying used books from Amazon. I read them and they cluttered my apartment as well.

Last year, I moved to Charlotte and got even wiser. They have a multi-million dollar high tech library. I can see the card catalog, reserve books, and even renew outstanding books online. When you reserve a book that is currently out, a computer will call you at home and notify you when it is back. Like I said, every book I checkout feels like a tax rebate. (Also, for IPOD and mp3 people - most libraries have huge cd collections of classical music and whatnot. I have seen individuals checking out 20 cds at a clip for obvious "intellectual property" theft. Good for them.)

Friday, April 08, 2005

Cookie Monster is another casualty of the war on obesity. Cookies will now be de-emphasized as "sometimes" food while eggplants and carrots will be touted and craved. (How dumb do they think kids are?)

An AP columnist suggests, soon Oscar the Grouch will be "nice and clean"!!!!!

The state legislature of Maryland has approved a most deplorable anti-business measure. It proposes to tax any business in Maryland that employs at least 10,000 workers and is not paying at least 8% of its payroll towards employee healthcare. In practice, this will only affect one company, Wal-Mart. They employ 15,000 people in Maryland and currently pay about 7% of payroll towards healthcare.

So here we have a bunch of politicians trying to tell a business how to allocate its payroll benefits. What is their purported justification - that the state has to pay the healthcare of poor residents via Medicaid and that apparently Wal-Mart is somehow contributing to this fiscal burden?

There is so much going on here that I really don’t know where to begin. This legislation is built on the false premise that since only 54% of Wal-Mart’s Maryland employees get some form of employee sponsored healthcare, that the rest of the employees don’t have any health coverage at all, and are usurping the state’s Medicaid funds. Maybe some of these uncovered employees have health insurance through their spouses. Where is the data on this? But the larger issue is whether or not it is appropriate for government to be interfering with private enterprise in this way.

This proposed law represents nothing less than a socialist political attack on Wal-Mart. This case really highlights how economically illiterate many politicians are. First of all, Wal-Mart may decide to close some stores to get under the 10,000 employee threshold. Wouldn’t 5,000 more unemployed Marylanders hurt the state’s Medicaid budget? And wouldn’t closing some stores limit consumer choices in those areas and result in higher prices paid? Or Wal-Mart may just raise prices across the board to recoup this new tax – also bad for consumers. The politicians think they were clever to put the threshold at 8%, just above Wal-Mart’s current percentage (also this is clear evidence that the law was written to punish one company). Today the fine would just be $11 million, a number that Wal-Mart could manage to pay. Their intention was to make Wal-Mart look cheap (and inhumane) for fighting the legislation. But as in any extortion case, the stakes are much larger. If Wal-Mart caves in and pays the fine, they may inspire similar legislation in other states and thus are unlikely to roll over. At a minimum, Wal-Mart has already delayed plans for a new distribution center in Maryland because of this law. There is no way that this situation plays out favorably for residents of Maryland – and they can thank the politicians that they elected.

If I ran Wal-Mart, I would play hardball with these pols. I would move some stores just over state lines to teach them a basic lesson in capitalism.

Brainless Wal-Mart bashing is out of control these days. To the critics of its “low wages and benefits”, I ask why then does Wal-Mart have ten times as many applicants as it does jobs when it opens a store? The unions and their political allies implicitly think Wal-Mart employees are too stupid to realize that they are being “exploited”. How is that for arrogance?

No Wal-Mart bash is complete without the requisite empathy for the poor “mom and pop” stores that Wal-Mart devours. This canard fulfills the econo-moronic template as the “pitiable victims of rich evil CEOs”. Every time I hear the “mom and pop” lament, I think back to the last air conditioner I bought in Brooklyn. I went out of town to Wal-Mart and got a huge 12,000 btu air conditioner for around $240. The same air conditioner sold at the “mom and pop” hardware store in my neighborhood for $700. Wal-Mart critics don't care about the moms and pops that shop.

What a shocking title. Was this going to be a defense or indictment of the Social Security system? Could one expect a judgment on today’s level of illegal immigration? Actually, the article provided none of the above. It mostly laments how illegals probably won’t be entitled to any of the social security (or Medicare) taxes that are withheld from their paychecks. So the author is only addressing the subset of illegals that procure fake IDs and work “on the books” of an employer.

I’ve summarized the lowlights below. My comments are in RED.

STOCKTON, Calif. - Since illegally crossing the Mexican border into the United States six years ago, Ángel Martínez has done backbreaking work, harvesting asparagus, pruning grapevines and picking the ripe fruit. More recently, he has also washed trucks, often working as much as 70 hours a week, earning $8.50 to $12.75 an hour.

Not surprisingly, Mr. Martínez, 28, has not given much thought to Social Security's long-term financial problems. But Mr. Martínez - who comes from the state of Oaxaca in southern Mexico and hiked for two days through the desert to enter the United States near Tecate, some 20 miles east of Tijuana - contributes more than most Americans to the solvency of the nation's public retirement system. (He contributes more than most?….WTF?)

Last year, Mr. Martínez paid about $2,000 toward Social Security and $450 for Medicare through payroll taxes withheld from his wages. Yet unlike most Americans, who will receive some form of a public pension in retirement and will be eligible for Medicare as soon as they turn 65, Mr. Martínez is not entitled to benefits. (He wasn’t ELIGIBLE for much before he jumped the border either.)

He belongs to a big club. As the debate over Social Security heats up, the estimated seven million or so illegal immigrant workers in the United States are now providing the system with a subsidy of as much as $7 billion a year. (Is this “subsidy” for the government maybe offset by the increased government spending on social services, law enforcement, and education for illegal immigrants and their families? In other words, is this exploitation only a one-way street?)

In the current decade, the file is growing, on average, by more than $50 billion a year, generating $6 billion to $7 billion in Social Security tax revenue and about $1.5 billion in Medicare taxes. (Is $6-7$ billion a lot of money?)

Yet to immigrants, the lack of retirement benefits is just part of the package of hardship they took on when they decided to make the trek north. Tying vines in a vineyard some 30 miles north of Stockton, Florencio Tapia, 20, from Guerrero, along Mexico's Pacific coast, has no idea what the money being withheld from his paycheck is for. "I haven't asked," Mr. Tapia said. (So this journalist cares more about illegals paying into the Ponzi “trust fund” than the rest of Americans, I guess.)

What a totally contrived and insipid news article… What did the NY Times do? Say, “How can we combine two issues of the day into one story?”

The $6-7 Billion in annual social security tax revenue sounds like a big number, but it isn’t. With over $550 Billion in total social security revenue, that “bolster” amounts to at best 1.2 % of the total. Journalists love to scare the little people with big numbers.

In the article, some Social Security actuary is quoted as saying that 75% of illegals have gotten the fake IDs and are working on the books. I don’t believe this for a second. If that was true, why do illegals migrate (pardon the pun) towards cash jobs like cab driving, housecleaning, landscaping, restaurants,….. Now I don’t know the true percentage, but am hard-pressed to ignore my own empiricism for the word of some bureaucrat.

Another glaring error is the estimated 7 million illegal workers. Every other estimate puts the number more like 11 million illegals, of which 6-7 million are Mexicans. Where are the editors?

Again, I am not bashing illegal immigrants, just the shoddy journalism and the shameless disregard for logic and facts. Actually, I have a more benign view of illegal immigrants than almost anyone I know. But my views are evolving and I see where I could be completely wrong. Heather Mac Donald has said that many in the northeast think like me because we are colored by our interactions with hardworking gardeners and waiters. What is not to appreciate in people working their tails off for a better life? What we don’t see are the violent gangs in California and other parts. Nor do we remember the 9/11 hijackers.

Sunday, April 03, 2005

How annoying is it why someone sents you a hyperlink to a story, you click on it, but the site requires registration to view its content? I don't think I could even conjure up another user ID and password, nor do I wish to keep using the same ones for every site. Next time you have this problem, go to:

Saturday, April 02, 2005

Below is an article from Island Voices on March 29, 2005. This article is a perfect example of the complete economic illiteracy of the popular press. My comments are in RED.

Facts don't support minimum-wage criticsBy James Weatherford

State Rep. Colleen Meyer is sounding a false alarm based on familiar, if unfounded, warnings about increasing the minimum wage ("Minimum wage hike would hurt everyone," March 27). The oft-repeated siren of minimum-wage doomsayers warns that an increase in the minimum wage would close businesses and cost jobs.

To add to this siren, Meyer spreads before us a game of chance: one pea, three shells. I wonder who owns the pea in this game? Not a minimum-wage worker trying to feed a family on $6.25 an hour. For that family, playing a game with a pea doesn't happen. A minimum-wage worker would rather share the pea with her hungry family. (I THOUGHT POOR PEOPLE WERE OBESE?)

I refer to research by the Fiscal Policy Institute and the Economic Policy Institute that reveals a reality different from the apocalyptic claims of minimum-wage doomsayers.

The research has found no correlation between minimum-wage increases and a rise in business failures, either in the year the increase occurred or in the following year. The economy, especially small business, has done well in the years following implementation of a minimum wage. In the wake of minimum-wage increases in both 1990 and 1997, the U.S. economy had strong growth (HOW DO YOU KNOW IT WOULDN'T HAVE BEEN EVEN STRONGER? BY THIS SWEEPING LOGIC, NO EVENTS WHATSOEVER IN THOSE YEARS COULD HAVE SLOWED ECONOMIC GROWTH.) Between 1998 and 2001, the number of small-business establishments grew twice as quickly in states with higher minimum wages.(I WOULD LOVE TO SEE THE STATS ON THIS. WHY ONLY A 3 YEAR SAMPLE? WHAT ABOUT GROWTH IN LARGE BUSINESS? WHAT ABOUT THE EXPLOSION IN ILLEGAL IMMIGRATION SINCE THE MINIMUM WAGE INCREASE? THIS CRAP-TISTIC IS NOT EVIDENCE OF ANYTHING.)

A comparison of states with minimum wages above the federal level has shown that increasing the minimum wage has not resulted in less hiring (THIS IS 100% UNTESTABLE HYPOTHESIS. NO MATTER WHAT THE NUMBERS SAY, NO HUMAN COULD PROVE THAT WITH THE MIN. WAGE UNCHANGED, THAT THERE WOULD NOT HAVE BEEN EVEN MORE HIRING. THIS IS ABSOLUTELY UNKNOWABLE.) Since the minimum-wage increase in 1997, low-wage workers, particularly single mothers, have found employment at increased rates (SO SINCE 1997, THE ONLY THING THAT COULD ACCOUNT FOR “INCREASED RATES” OF LOW WAGE EMPLOYMENT IS A RAISE IN THE MINIMUM WAGE? I GUESS THE GREATEST BULL MARKET IN HISTORY HAD NOTHING TO WITH IT. HIGH WAGE EARNERS HAVE ALSO FOUND EMPLOYMENT AT "INCREASED RATES" SINCE 1997. BY THIS SPECIOUS REASONING, I COULD ARGUE THAT THE MINIMUM WAGE INCREASE IN 1997 HELPED THE CEOs EVEN MORE THAN THE LOW WAGE EARNERS.) Those who will benefit most from a higher minimum wage are concentrated among working women, many of whom are single mothers. Among the workers to benefit from a minimum-wage increase, 60 percent are female and 72 percent are age 20 years and over. (ALSO AMONG THE BENEFICIARIES OF A HIGHER MINIMUM WAGE, 100% OF THE ILLEGAL, "UNDOCUMENTED" WORKERS. AMONG THE POTENTIAL LOSERS, ALL OTHER WAGE EARNERS WHO GET SOME OF THEIR HOURLY WAGE REDISTRIBUTED TO THE MINIMUM WAGE EARNERS - NOT EXACTLY A SMALL DEMOGRAPHIC.)

The reality is that minimum wages do not cause business failure nor result in job losses, as claimed by the doomsayers. (THERE IS A LOT OF RED INK IN THE ARGUMENTS ABOVE.)

How does a higher minimum wage affect the economy?Raising one worker's "minimum wage from its current rate of $6.25 to as much as $8" does give that one worker a "28 percent wage hike." However, for a wage-earning worker now at $6.75 or $7.75 an hour, the pay raise is less than a "drastic" 28 percent. (IGNORING THIS NON SEQUITUR.)

Nevertheless, about that one worker: Ms. Cleaning Lady would get a 28 percent raise on her job where she empties the trash cans and washes the urinals of million-dollar executives. (SHE COULD GET A 28% RAISE OR SHE COULD LOSE HER JOB. ALMOST EVERY OFFICE I HAVE WORKED IN WAS CLEANED BY “UNDOCUMENTED” JANITORIAL SUBCONTRACTORS. AND APPARENTLY ONLY "MILLION-DOLLAR EXECUTIVES" GET THEIR URINALS CLEANED.)

Ms. Cleaning Lady might spend some of the extra wage on clothes for herself and her family, or maybe for a new sofa or refrigerator. If she is frugal, she can save some of these extra earnings for her child's high school education. If she is a miracle worker, she can save for the child's college education. (NOW THE ARGUMENT GETS EMOTIONAL FOR THIS THEORETICAL ALLEGED BENEFICIARY.)

When a low-income worker with minimal material wealth gets an increase in wage, a large part of that increase is spent on basic personal and household items. Purchases of clothes, sofas and refrigerators circulate money in the economy and register demand for these products. Because satisfying customers' needs is what matters most in a market economy, employers increase hiring to satisfy demand generated by increased income. (BY THIS REASONING, WE SHOULD INCREASE THE MINIMUM WAGE TO SAY $20 AN HOUR. IF WE DID THAT, THE MINIMUM WAGERS WOULD BE FLUSH WITH CASH, BUYING SOFAS AND TVs, AND THE ECONOMY WOULD EXPLODE!!)

The economic common sense of workers as buyers, and wages as expenditures, seems to escape minimum-wage doomsayers, who also appear naive to the futility of trying to sell anything to a customer who has no money. (SO IT IS THAT SIMPLE, IF BUSINESSES JUST PAY EVERYONE MORE, THEN THEY WILL MAKE MORE MONEY. WOW. THANK GOD THIS MORON IS DONE.)

James Weatherford is a resident of Kea'au, Hawai'i. He wrote this commentary for The Advertiser.

I am not arguing here against raising the minimum wage. The purpose of this post is to demonstrate the classic econo-moronic newspaper article. If this pseudo-savant had ever read a Statistics 101 book, he may have learned that correlation does not imply causation. Meaning that just because the economy did well overall, post-1997, one cannot infer that raising the minimum wage had no negative economic impact.

I don't see how any minimum wage debate can ignore the issue of illegal immigrants today. Raising the minimum wage is only going to enlarge the under-the-table job market. A wage raise would have to be coupled with a tighter border to have any efficacy.

Back to this moron. One of the focuses of my blog will be to show that this article is not of anomalous form. These econo-illiterate journalists all cook from the same recipe - sophistic arguments based on dubious statistics that dramatize the pitiable victims of rich evil CEOs (men and women that pee standing up - the "urinal" jibe).

A teacher of mine once said that it is socially acceptable in the United States to say, "Well, I am not good at math...." (as opposed to maybe Asia). But you will never hear anybody say, "I can't read or write..." This couldn't be more true.

Likewise, here in the epicenter of capitalism, economic illiteracy should be much less prevalent.